Global CIO: Chevron's IT Transformation: A Tech Company In The Energy Business

CIO Louie Ehrlich's new IT transformation strategy at the $265 billion global powerhouse is making the line between Chevron's IT operations and energy business even more blurry.

Chevron's chairman views the energy giant as a technology company that happens to be in the energy business. And inside this massive techno-energy crossover with 2008 revenue of $265 billion, CIO Louie Ehrlich views his job as not only fueling operational excellence but also altering the IT spending mix away from internal operations and toward growth-oriented change and innovation.

The good news for Ehrlich is that Chevron, in spite of the global economic slowdown and sharp plunge in year-on-year revenue due to lower fuel prices, is aggressively pursuing new energy sources in offshore areas of Mexico, Brazil, and Angola. And with IT inextricably engaged in every facet of Chevron's operations (remember, it's a technology company), Ehrlich and his global team are at the forefront of the company's efforts to seek out, find, analyze, evaluate, extract, refine, market, and sell the energy that runs the global economy.

The challenge behind that opportunity is finding the money to make it possible, and Ehrlich is looking inward for those funds. In a sweeping effort to increase the business impact and relevance of IT on every facet of Chevron's operations, Ehrlich and his CIO-level colleague Denise Coyne are planning to consolidate 100 global data centers into 50, rationalize and reduce the tangled web of applications running across those data centers, virtualize hundreds of servers, and upgrade 90,000 desktops that will run Vista.

While those steps are absolutely being taken to lower overall IT expenses and simplify what had become a hugely complex and sometimes-inefficient global IT infrastructure, Ehrlich also believes they will serve as highly tangible examples of his new IT vision to prioritize, simplify, and integrate aggressively across the globe.

Noting that the data center consolidation project will lower costs for real estate, energy, security, and administration, Ehrlich said that while those cost reductions are undoubtedly essential, the even bigger impact could come from what those savings are poured into.

"Where that data center consolidation will really help is in our quest to reduce our spending to keep the lights on and giving us the funds necessary to pursue vital new projects," Ehrlich said.

Speaking of the 80/20 IT budget ratio, Ehrlich noted that "some CIOs, with all this economic pressure these days, kinda punt for a while on the value-add and spend a lot of time rationalizing the environment to get to the point where you can start to think about how you can switch money from one to the other. Our approach is to do both simultaneously without, of course, spending even one dollar more than we're already spending today.

"We're at about 65% on run and 30% to 35% on change," he said. "I'd like that to be better because you always want to free up more toward adding value to the company. And that's not to say that the dollars that have to be spent on your run agenda are bad spending because a lot of that's necessary. You just have to figure out the very best way to get that done for the lowest possible investment."

Digital business isn't about changing code; it's about changing what legacy sales, distribution, customer service, and product groups do in the new digital age. It's about bringing big data analytics, mobile, social, marketing automation, cloud computing, and the app economy together to launch new products and services. We're seeing new titles in this digital revolution, new responsibilities, new business models, and major shifts in technology spending.